News & Analysis

Week Ahead -Trade Talks, Central banks and NFP

July 29, 2019

By Deepta Bolaky
 @DeeptaGOMarkets

Week Ahead

It will be a pivotal week with the key central banks’ meetings and the Non-farm payrolls while investors will also monitor the US-China faceoff in Shanghai amid deal pessimism.

Trade Talks in Shanghai 

Trade negotiations between the US and China resume this week. It will be the first time since the G20 meeting that both countries will meet in person. Investors have lowered their expectations of a trade deal, but they are currently finding relief that both parties are willing to revive trade talks.

Markets are cautious as there is still a big gap between the world’s two biggest economies. Trade protectionism measures are having a significant impact on the global economy, and it is unlikely that the tensions in the global trade system will die down anytime soon.

The latest GDP figures in the US last week shows that the American economy is slowing dragged by Business Investment, Manufacturing and Housing sectors amid trade tensions and a slowing global economy. The annual GDP is significantly lower at 2.1% from 3.1% in the first quarter.   

Central Banks 

Markets participants are pricing in aggressive monetary easing from nearly all central banks from developed countries. 

Federal Reserve (Fed)

Among the various central banks’ meetings, the focus will be on the Fed’s Interest Rate Decision on Wednesday. Markets are preparing for the first-rate cut in a decade, and are forecasting at least two or three more rate cuts in the next 12 months. Investors are anticipating at least 25 basis points cut this Wednesday.

The Fed will be among the leading market movers this week. 

Bank of England (BoE) 

It will be interesting to see how the BoE will play out the possibility of a no-deal Brexit with the new hard-line Brexiteer as the new Prime Minister. There are already alarming signals from the domestic economy. The recent data shows a sharp downturn in the last couple of months, which are likely going to worsen with the elevated risks of a hard Brexit.

The Pound barely reacted to Boris Johnson’s victory as it was highly anticipated. However, if the BoE sounds more dovish than last time following the appointment of the new Prime Minister, it will add further downward pressure on the local currency.

Alternatively, if the BoE is less dovish, the gains will still likely be capped given the ongoing Brexit uncertainties.

Bank of Japan (BoJ)

The BoJ will deliver its interest rate decision and policy statement before the Fed on Tuesday. We do not expect any material change in policy. However, traders will look for clues regarding further easing policy later this year.

Nonfarm Payrolls

The busy week will end with Nonfarm payrolls on Friday. The Fed’s interest rate decision on Wednesday may set the tone to how traders will react to the jobs reports. Generally, NFP is already a significant market mover.

If the Fed cut interest rate, and strike data-dependent language for the next move, the nonfarm payroll figures will be of utmost importance. It will definitely be a big week for the US dollar.

Tuesday, 30 July 2019
Indicative Index Dividends
Dividends are in Points
ASX200WS30US500US2000NDX100CAC40STOXX50
000.2970.0720.67200
ESP35ITA40FTSE100DAX30HK50JP225INDIA50
000001.4690

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